881 F.3d 1169
9th Cir.2018Background
- San Francisco Ordinance No. 225-14 (S.F. Admin. Code § 37.9E) requires landlords to give tenants a Rent Board disclosure before commencing buyout negotiations, file a declaration with the Rent Board, allow a 45-day rescission of signed buyout agreements, and submit executed buyout agreements to a public, searchable database. A related subdivision-code provision bars condominium conversion for 10 years in specified buyout circumstances.
- The disclosure form must inform tenants of rights (including right to rescind and counsel) and list tenants’ rights organizations; landlords must retain signed forms and certify under penalty of perjury that disclosure was provided.
- Plaintiffs (individual owner and landlord organizations) sued in state court asserting federal and state constitutional claims: First Amendment (speech/compelled speech), equal protection, due process, California privacy, and liberty-of-contract; case removed to federal court.
- The district court granted the City’s motion for judgment on the pleadings and dismissed with prejudice; the Ninth Circuit reviews that ruling de novo and affirms.
- The Ninth Circuit held: (1) the ordinance does not prevent landlords from commencing negotiations if a tenant refuses to sign; (2) disclosure and temporary pre-negotiation restrictions regulate commercial speech and survive Central Hudson/Zauderer scrutiny; (3) the public database does not violate California privacy protections; (4) equal protection and due process claims fail under rational-basis review; and (5) the condominium-conversion restriction does not unconstitutionally impair liberty of contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ordinance requires tenant signature before negotiations ("gag rule") | Ordinance functionally bars negotiations unless tenant signs the disclosure form | Ordinance requires only providing the disclosure and a landlord certification to Rent Board; no signature prerequisite | No gag rule; landlords may commence negotiations without tenant signature |
| First Amendment—commercial speech restriction | Disclosure provision and pre-negotiation limits unlawfully restrict/prohibit protected speech | Speech is commercial; restrictions are limited in time and tailored to substantial interests | Survives Central Hudson: regulation of commercial speech is permissible |
| First Amendment—compelled speech | Listing tenants’ rights organizations compels ideological speech | Disclosure is factual, non-ideological, reasonably related to governmental interest | Survives Zauderer: compelled factual disclosures are permissible |
| California privacy—public database of agreements | Publicizing buyout agreements and unit addresses invades landlord privacy | Landlord contact, property addresses, and transaction terms are public or not constitutionally private | No protected privacy interest; database constitutional under California privacy analysis |
| Equal protection / Due process; redaction asymmetry | Ordinance irrationally targets landlords and fails procedural protections; redacts tenant names but not landlord names | Landlords are not a protected class; publication of business info is public record while tenant home identity implicates privacy; regulation rationally advances tenant-bargaining goals | Rational-basis review: ordinance survives; equal protection and due process claims fail |
| Liberty of contract—condominium conversion bar | Ten-year ineligibility for conversion after certain buyouts unconstitutionally impairs contract/liberty | Regulation of conversions is a valid exercise of municipal police power and rationally related to housing policy | Survives rational-basis review; liberty-of-contract claim fails |
Key Cases Cited
- Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971 (9th Cir.) (standard for judgment on the pleadings)
- Nelson v. City of Irvine, 143 F.3d 1196 (9th Cir.) (defining municipal definitions for disability-context in local ordinances)
- Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557 (commercial-speech four-part test)
- Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (commercial speech protection principles)
- Edenfield v. Fane, 507 U.S. 761 (fit/tailoring requirement for commercial-speech regulation)
- Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (compelled factual disclosures in commercial speech)
- CTIA—The Wireless Ass’n v. City of Berkeley, 854 F.3d 1105 (9th Cir.) (application of Zauderer standard)
- American Academy of Pain Management v. Joseph, 353 F.3d 1099 (9th Cir.) (commercial speech characterization)
- Levald, Inc. v. City of Palm Desert, 998 F.2d 680 (9th Cir.) (rational-basis support for disclosure and rent-related regulations)
- City of Cleburne v. Cleburne Living Center, 473 U.S. 432 (rational-basis equal-protection standard)
- Hill v. National Collegiate Athletic Ass’n, 7 Cal.4th 1 (Cal.) (California constitutional privacy framework)
- Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421 (deference to legislative economic regulation; limits on liberty-of-contract challenges)
- Pennell v. City of San Jose, 485 U.S. 1 (legitimacy of rent-control objectives as governmental interests)
- Griffin Development Co. v. City of Oxnard, 39 Cal.3d 256 (Cal.) (municipal police-power authority over condominium conversions)
- McCarthy v. Mayo, 827 F.2d 1310 (9th Cir.) (Contracts Clause and protection only of pre-existing contracts)